Latest / Founders and Funding / Ep 16 - Alister Esam - Angel Investor and Founder of Angel6

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Ep 16 - Alister Esam - Angel Investor and Founder of Angel6 · Founders and Funding

• 0:01
  Hi, welcome to the Founders and funding podcast.
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  I'm your host, Philip Smith. On the podcast, I'll be
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  interviewing founders, investors, startup advisors on
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  how to fund the journey of your startup and some tips and advice
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  they have for you along the way. This podcast is sponsored by
• 0:17
  Perfect Technologies and Laden. Enjoy the episode.
• 0:23
  Hi Alistair, welcome to the Founders and Funding podcasts.
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  Thank you, Philip. Glad to be here.
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  My pleasure to have you on to set us off, Alistair.
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  Talk to me about your company and your role.
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  So I'm not sure it's really a company, but I'm a, I'm an
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  exited SAS founder. So I have my business with ball
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  packs and we people used to turn up to board meetings with big
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  paperbacks and now they turn up with iPads.
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  And we were the guys that did the tech around that.
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  And I exited that in 2018. And since then I've, I've sort
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  of been investing all sorts of things.
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  I've tried everything on the investing front, ended up with a
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  couple of things that I think work really, really well.
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  One of them is kind of share trading and the other one is
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  startups. And when I did that, I was quite
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  surprised how naive the whole industry is with regards to
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  investing. And it's a really, it's a really
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  interesting area where it's not you can argue isn't very
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  efficient at all from an investor point of view.
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  So my first investment failed, my next investment suddenly gets
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  a 10X. My third fails, my 4th gets a
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  10X. And I keep going because the 10X
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  is making it worthwhile. And I start to see a pattern
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  really amongst these investments that I'm making.
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  And the failures get less and less and the successors seem to
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  come kind of more and more. And now I'm, I'm kind of like
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  reviewing hundreds of start-ups every year and I'm picking the
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  best 6. And so I recently found this
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  thing called Angel 6 where investors can follow my track
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  record, follow me, I will share the investments at no cost with
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  them and they can. And that just helps helps me
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  raise more money for the for the startups I'm investing in, which
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  is which is which which helps them.
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  Fantastic. Well, that's some really great
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  experience. And I think a lot of investors,
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  they probably envy, envy the 10 exports.
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  Don't you know, they've had plenty of losses themselves.
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  It's very hard to pick and choose.
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  And what does an average day look like right now?
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  So are they typically start work till about somewhere between
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  10:00 and 11:00? So if I'm at home, I might walk
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  in the dog with my wife. We'll go for a coffee every
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  morning. I'm kind of, I kind of decided
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  I've slipped into this not working very hard life and and
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  the investment suits that. So we're a lot of holidays.
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  We've got a holiday home. We'll go to a lot race cars.
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  And so I have 50% of my time's leisure.
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  But when I'm not doing that, I mean, really it's, it's talking
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  to my start-ups, mentoring the ones I mentor on the board of a
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  few. But a lot of my time is spent
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  like sat on my desk. And I love doing this, looking
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  at whether it's the start-ups or the share trading, just
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  reviewing the investments and working out where the
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  opportunities are and trying to apply an analytical approach to
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  that, which not many people do. So I mean, that's, that's it
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  really. I'm at my desk or I'm having
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  fun. Yeah, well, at that, to be
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  honest, I think it's a it's a good way to to be.
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  But I'm very much pro kind of a mixed lifestyle.
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  I think some people can be too rich with the 9:00 to 5:00.
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  I think have your mornings or your evenings and your weekends
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  or even work weekends or take Mondays off.
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  Just I think once the routine I think supports the the work.
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  I think I'm a big believer in that.
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  And I think you've earned that right to be able to have the
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  freedom as well. So kudos to you.
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  My wife quite well illness, my wife, my wife might argue with
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  this, but I I like to claim that my calendar, everything in my
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  calendar, I can just change it all and move it all and cancel
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  it and postpone it because the start-ups will wait.
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  Investing will wait. You know, nothing's nothing's
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  urgent. So if we want to have a week
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  off, we can. But she'll always say, oh, hang
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  on, what about this? But.
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  I think that's, I think that's the dream life for myself.
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  I think that's the way to have it and talk to me with some of
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  these startups that you've invested in.
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  And why Alistair? Yeah.
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  So I've had some some great startups over the years and most
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  of them are still in. So some some that are doing
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  really, really well and astonishingly well really, you
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  know, 2020 times returns on on all of them.
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  So the, the ones that I'm investing in at the moment, I
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  think it seems to get better and better because the ones I'm
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  investing at the moment, I do this thing where I score the
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  startup a few months after I've invested when the 1st update
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  comes out. Because when you're investing,
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  you get very excited. It's quite an interesting thing.
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  As soon as you sign the cheque, you go and you, I'm a very
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  positive person, but you start to look at, oh, did I make a
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  mistake there? And there's a few where I've
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  gone, oh, oh, you know what? I'm not sure.
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  I think that was, I'm not, and I don't realise it until the
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  cheque goes out the door and you think, oh, big mistake.
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  And, and so the way I've started to score them, it's really
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  interesting. Is that like a month after the
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  update comes out, everything has calmed down.
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  You're now looking at it more objectively.
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  What do I, what do I, what do I now think about that?
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  I give them a confidence score of 100 and that's getting better
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  and better. I mean, the, the three I've
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  invested in most recently, Health key is a, is a
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  marketplace for health services. There's Habitat Learn, which is
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  an accessibility based ad tech focused ad tech company that is
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  hopefully kind of being going to be driven forward by one of the
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  IT phobal IT guerrillas. And another one is your future,
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  which is, is Gen. Z entry level hiring platform
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  with kind of a, an IP related patterns on on kind of how they
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  match or with some IP on how they match kind of profiles to
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  jobs. We ask to competitive space that
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  I've been wary about going into it because there's loads of that
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  stuff. But these three, what excites me
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  about them is they've come from typically in essence of them has
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  come from nowhere to something very, very successful in a very
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  short period of time. They're not asking ridiculous
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  valuations because they, they kind of short track record
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  because they've come from nowhere and the growth rate is
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  phenomenal. And they're doing that growth
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  typically without any sales team.
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  You know, this is they're just about to, to raise to, to, to,
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  to kind of accelerate. So I mean, they, they, they get,
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  they, they get really excited, they're going to be really
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  excited. Fantastic.
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  Well, it's, it's interesting. I think there was a bit of I've
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  always felt when you invested in a startup, when you when you
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  first learn about it, when you know, it's that kind of new
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  opportunity. It's a bit like when you maybe
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  you're the car dealership and you know that he says someone
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  else wants to buy the car to be gone tomorrow.
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  There's always a new fear that window of opportunity will
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  disappear, you know, But then when you take a breath and you
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  get home and you think, actually, if I want to drive
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  this scene and like, what's the what's the mileage of the
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  problems with it? But I think there's some
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  similarities there. And then what is the best way to
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  find a startup journey in your opinion?
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  Have you found, you know that they're better if they they
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  bootstrap or if they invest or get loans or is there certain
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  types of investments or or ways to fund it that you appeal to
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  you more? But I mean, if I, if I, if I
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  look at it from Michael, is he as an investor?
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  I like the ambitious ones that are looking to raise, raise,
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  raise, raise, raise, get really big and grow.
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  That's what I like because I know that's where the money is
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  as an investor, it's exciting and you get amazing returns and
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  you, you know, you that way you're working towards an exit.
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  I think it's interesting because I met one of my, I met one of my
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  investments the other day. That's one of doing, you know, I
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  think they're, they're kind of onto series B now and they are
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  the guy said to me, you know, do you think because it's a
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  question as to as a business strategy, he was asking from a
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  business strategy point of view, do you think we should, you
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  know, we should grow like like massively take on money, just go
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  for it? Or do you think we should sort
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  of remain a luxury product, scale down and, you know, study
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  off and get, get to profit and, and all this sort of stuff?
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  And, you know, from my point of view, if, if you're just looking
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  financially, the answer was grow.
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  But for, for the, for the actual founders point of view, it, it
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  depends what you want, because taking on that money is risky.
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  You know, quite often you, I've had some horror stories where
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  you know, the, the, the startup has done OK, but the CEO got
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  fired for underperformance. And this is the founder of their
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  business getting fired from their own business.
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  And, and you know, because they've signed a deal with the
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  VCs that that that allows that to happen.
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  And, and you know, they're ending up with very, very little
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  as a result because they decided to go for it.
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  So it's really, I think it's really about what your appetite
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  for risk is and what your, what you know, what lifestyle you,
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  you want as a founder. So, so I think it's a difficult
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  1, you know, and I think you have to look at it from that
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  personal viewpoint. Yeah, I think that makes a lot
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  of sense. But look, it's only, it's only
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  right that of course when you're investing into a start up that
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  you want to see that hunger for them to to want to invest and to
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  get investment and grow more. But there is certainly some
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  trade-offs and and it doesn't work out every time.
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  You know, it's kind of there's a bit of a kind of if you look at
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  just LinkedIn post, you might think that everything was rosy
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  all the time. What kind of reality is, is
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  certainly not that and to to look at the founders themselves
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  a bit, is there, is there certain skills that you think
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  Finer should possess or that skills that they might have that
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  would attract you to invest more Alistair?
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  It's, it's, I mean, this is kind of, this is the crux of, I
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  suppose my thesis and why I think it works, which is that
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  most angels look at the investment and they guess 2
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  questions. They go, is the idea good?
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  I think they do anyway, is the idea good?
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  So is it a good idea? Does that work right?
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  I, I'm, I'm, I'm crap at deciding if it's these things
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  are a good idea, right? I think something's a good idea
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  and it flops. And then I think something else
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  is stupid and it does amazingly well.
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  I think it's really, really a skill that I don't know how many
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  people have to judge that. And the second is all the
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  question you're asking is, you know, do you look at the fan?
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  Do you think they can do it? And I just think they're
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  terrible, terrible in the generality.
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  I think they're terrible ways to assess.
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  You know, I've got somewhere I think and it doesn't come across
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  as impressive, but I'm watching the nail it day in, day out.
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  And you know, it could be that they've got a great sales team.
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  Could be they've got something else about them.
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  And I just don't think that what we, what we expect a founder to
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  be is, is necessarily always the right thing that they need to
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  be. So having said that, there are a
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  few pass gates that I apply to, to the founders.
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  And one is these, these are obvious really, but I need to
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  trust them. So there's an element of trust I
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  have to build up. So, you know, always, every,
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  every investment. I mean, I'm even for a coffee, I
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  have a chat with them. They need to be willing to
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  listen. We, you know, we obviously comes
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  through on the first call whether they are or not, you
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  know, because if they're not willing to listen to, to, to me
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  and my suggestions, they're not going to listen to anybody.
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  And that's just that's the recipe for disaster.
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  And then there's there's a combination of investors that I
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  really think works really well. And it's when you have two
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  people found US1 is the kind of out there salesperson that you
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  know, can go and get business. So if I look at that's, it's
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  interesting when you, when I could learn about your future,
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  which is a recruitment business, they obviously got recruiters
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  working for them. Recruiters are just sales mad
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  people, all of them and say you know that, you know that
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  person's going to go out and get the business.
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  The second side of it is is the dev side.
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  And when it's a tech, because everything I do is tech.
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  And there was something Bill Gates said, I think he said
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  something along the lines of the a great developer is 1010
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  thousand. I think you said times more
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  effective than a good developer because they're a media
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  developer, because they get the right architecture, they get the
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  right structure, they go faster, they're just they can just kind
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  of handle more in their head. And and so you know, you, you
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  see that not necessarily when you meet the developer, you see
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  it in what they've built in what in the time scale that they've
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  built it. And if you put those two things
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  together, they're the two things that I think that, you know, can
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  swing it for me a little bit. But I I what I really need to
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  see is metrics on the. Yeah.
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  Well, the metrics are the the biggest insight of all really.
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  But that's an interesting point you made there because I think,
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  yeah, like I see a lot of investors, they look for maybe,
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  you know, maybe one sales guy, one kind of tech product guy.
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  But you know, you raised a good point there that there's there's
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  different ways that they can they can be ineffective.
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  Some finders might love with the laptop which was working with
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  terrible public speaking or vice versa.
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  But they can also implement, they can have a augmented team
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  of employees or freelancers they got to help fix something.
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  So I think there's it's certainly there's room for all
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  kinds of founders to succeed. And how can companies themselves
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  attract investors more effectively?
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  For me, everything's about the metrics.
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  So and when I tried it, like I say, I looked through, do I
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  think this is a good idea? Because if someone's buying it,
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  I don't do anything pre revenue. I want to see, I want to see
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  traction. So if someone's buying it, who
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  am I to say whether it's a good idea or not?
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  They they're the, they're the customers and they obviously
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  think it's a good idea. So I need traction, I need a a
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  big growth rate. I want to see that growth rate
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  and, and a scalable growth. So the ones I'd like that I just
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  mentioned, you know, they're, they're doing that growth rate
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  on, on the founder, doing so on founder LED sales.
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  So, you know, when that changes, they should grow a lot faster.
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  I want to see a market size from a bottom up that, you know, not,
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  not a top down. This is £100 billion market.
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  I want to see, you know, how many clients can, how many
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  clients can you sell this to? How many clients are you likely
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  to sell this to? What are they going to pay?
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  And you know, and does it translate overseas and and a
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  reasonable evaluation. But I know, so that's what I
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  want to see. But I do think that I do think
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  that that's not necessarily that's might might not be the
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  exact answer to your question because, you know, other people
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  want to see other things. And I think if you do do an
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  exciting picture, you put a vision forward and, and you've
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  got the idea at Angel level and even at VC level, at Angel
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  level, they people like that good idea thing.
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  I think you will get investment. I see all the time and I'm
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  amazed sometimes they're pre revenue things with with £7
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  million valuations that are just easily getting the money because
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  the people like the idea. And then I think even at even at
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  VC level, I think what people like at BC level is the is, is a
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  believe, they're to believe that there is a massive market
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  opportunity because they want the big, they want the big
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  prizes. Sometimes I don't think that's
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  necessarily sometimes I think that where there's a, where
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  there's a huge market, there's a lot of competition and, and in
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  a, and so there will be other players.
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  And then so big is good, but huge isn't sort of 10 times
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  better necessarily. But I think VCs do like that.
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  Yeah, I think that's a very good insight.
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  And if you'd one key piece of advice to share and fund in the
• 14:58
  startup, what would it be? In funding a startup, I think
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  it's like, give you an example. I mean, I had one of my own
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  startups come back to me and it's one, it's one of the ones
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  that I've got to be careful what I say is not going to give the
• 15:17
  name away, but it's one of the ones that I probably, I'd
• 15:20
  probably after investing, thought was that such a good
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  idea? And I, I think they will make
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  it. And I think they could be
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  massive, but they, they are struggling a little bit and they
• 15:30
  have got their, their, they came to me with a, a new pitch deck
• 15:34
  saying we're raising again because we, you know, we need to
• 15:36
  raise and we're raising at the same valuation as as last time.
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  And, and here's the story and they showed me the story and it
• 15:43
  was just a fairy story. It was basically if we, if we
• 15:46
  sell five times as much as we have been selling, we'll be
• 15:50
  fine. And it's going well.
• 15:53
  Well, I don't know where you're getting that from because how,
• 15:55
  how's that, how, how are you going to do that?
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  You're not explaining it. It's just like you've literally,
• 15:59
  you've literally just put the percentage growth figure in that
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  gets you to, gets you to profitability and to and to have
• 16:07
  long enough runway. And so I think that, you know,
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  you, you, I, I think that and if I look at that and that problem
• 16:13
  was that they were kind of trying to do that in isolation.
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  And so I went back and I sat down with them and they said,
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  look, let's look at this again. And they, they had ways to
• 16:20
  monetize what they were doing that they weren't doing.
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  And, and that's what they needed to do.
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  And that's the only way out of where they've got to.
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  And they're, they're doing that now.
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  But you know, they were, they just put their head in the sand
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  and they weren't really facing the brutal truth.
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  And so I think, you know, I think before you go to market
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  making claims that, you know, be honest if you're not going to,
• 16:41
  if it's not going to work, don't, don't go to market.
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  Just work out how, how you can change it.
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  So it does work because there's, there's always a way to, there's
• 16:48
  always a way to kind of monetize and, and, and revamp and pivot
• 16:52
  to make it work. And sometimes they, they just
• 16:54
  try to get more funding for what they're doing.
• 16:57
  So, yeah, yeah. I think that's kind of great
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  advice to finish on. I think a lot of founders,
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  definitely a bit of a reality check because there's certainly
• 17:03
  ways they can get there, but often they're just strong, the
• 17:06
  upward graph without too many ways to get there.
• 17:10
  And Alexa, thanks so much for going to the podcast.
• 17:12
  That was a really great conversation.
• 17:14
  You should a lot of really viable interesting for both
• 17:16
  founders and investors, which is unique.
• 17:19
  So thank you for your time. Thank you.
• 17:20
  Good luck. Thanks for me.
• 17:21
  OK, best of. Luck.
• 17:23
  Thanks. Hi, thanks for listening to this
• 17:26
  weeks episode of the Founders and Funding podcast.
• 17:29
  If you'd like to be a guest or have a guest suggestion, please
• 17:32
  get in touch. Thank you.